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the_dork

Why So Many Predicting Big Downfalls?

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I’ve browsed here a while and there seem to be a substantial amount of people predicting mass falls within the medium term future (5 years etc). I just don’t understand where this has come from, have I missed all the threads explaining this?

Bank bonuses are up, more people will inherit their capital from baby boomers who realise their kids won’t live as well as them, no scope for the drastic increase in supply that people say we need (don’t know why- don’t see many homeless people who are there through not getting mortgages). We’ll have a 2 (maybe 3) tiered system of owners, subsidizers of buy to letters and a lucky few in social housing. If prices start to fall they’ll be bought by those who can afford them-people who bought their first properties 20+ years ago. There will be no rapid downfalls.

There will be no mass social housing to provide further options, we’re just heading for even bigger class divide-as with most historical divides in history it will actually be the toiling masses being exploited.

What are the factors that honestly make people think prices will fall 50%?

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Guest UK Debt Slave
I’ve browsed here a while and there seem to be a substantial amount of people predicting mass falls within the medium term future (5 years etc). I just don’t understand where this has come from, have I missed all the threads explaining this?

Bank bonuses are up, more people will inherit their capital from baby boomers who realise their kids won’t live as well as them, no scope for the drastic increase in supply that people say we need (don’t know why- don’t see many homeless people who are there through not getting mortgages). We’ll have a 2 (maybe 3) tiered system of owners, subsidizers of buy to letters and a lucky few in social housing. If prices start to fall they’ll be bought by those who can afford them-people who bought their first properties 20+ years ago. There will be no rapid downfalls.

There will be no mass social housing to provide further options, we’re just heading for even bigger class divide-as with most historical divides in history it will actually be the toiling masses being exploited.

What are the factors that honestly make people think prices will fall 50%?

I tend to agree that dramitic house price falls are looking less likely but it will be much harder in future for people to become property owners. Life is going to be much tougher for the poor and the aspiring in future.

Savers and people with pensions and investments are being being slaughtered while the banksters pay themselves record bonuses after creating the biggest financial crisis in history. It's the biggest heist ever and the people are totally disempowered to do anything about it........mostly because they don't even realize how badly they are being shafted.

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because they are very expensive on all measures, and markets tend to be self-correcting in the medium term

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Several reasons:

- Unemployment is growing.

- Tracker mortgages currently linked to the 0.5% base rate will, mainly, reset.

- Interest rates will rise to protect sterling from devaluation as the inflationary effects of QE work through.

- New debt is not available on the same terms as debt up to 2007.

- House prices will likely return to historic earnings multiples, with the usual undershoot beforehand. (Typically average house price is 4x average salary - currently 5x+)

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I’ve browsed here a while and there seem to be a substantial amount of people predicting mass falls within the medium term future (5 years etc). I just don’t understand where this has come from, have I missed all the threads explaining this?

Bank bonuses are up, more people will inherit their capital from baby boomers who realise their kids won’t live as well as them, no scope for the drastic increase in supply that people say we need (don’t know why- don’t see many homeless people who are there through not getting mortgages). We’ll have a 2 (maybe 3) tiered system of owners, subsidizers of buy to letters and a lucky few in social housing. If prices start to fall they’ll be bought by those who can afford them-people who bought their first properties 20+ years ago. There will be no rapid downfalls.

There will be no mass social housing to provide further options, we’re just heading for even bigger class divide-as with most historical divides in history it will actually be the toiling masses being exploited.

What are the factors that honestly make people think prices will fall 50%?

Numerous reasons, here is one to start with, am sure others will contribute:

1. Houses are too expensive based on multiples of salary - put another way, the collapse of the ponzi scheme - by that I mean that the only reason that I can afford to buy a house in London is because I first bought in 1997 and have made "magic money" equity before selling last year. Based on salary multiples even those with good jobs can't even buy 3 bedroom semi in London unless they have over £100k in savings for a deposit.

In response to comments made above - most of those who first bought more than 20 years ago will have by now have moved up to their family house.

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When looking at economic indicators I give them a red or a green flag rating.

When I put red flags against such indicators as unemployment, GDP and money printing it tells me that there is no upturn between here and the horizon in site.

Even the green flags on equities have a short life span, because most of the increased dividends have come from cost cutting exercises, not increases in sales.

I see no green shoots.

Hope this helps.

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Several reasons:

- Unemployment is growing.

- Tracker mortgages currently linked to the 0.5% base rate will, mainly, reset.

- Interest rates will rise to protect sterling from devaluation as the inflationary effects of QE work through.

- New debt is not available on the same terms as debt up to 2007.

- House prices will likely return to historic earnings multiples, with the usual undershoot beforehand. (Typically average house price is 4x average salary - currently 5x+)

Not to disagree with all of your points but with regards to devaluation, I'm pretty sure the Gov't and the MPC would LOVE sterling to depreciate further.

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I’ve browsed here a while and there seem to be a substantial amount of people predicting mass falls within the medium term future (5 years etc). I just don’t understand where this has come from, have I missed all the threads explaining this?

Bank bonuses are up, more people will inherit their capital from baby boomers who realise their kids won’t live as well as them, no scope for the drastic increase in supply that people say we need (don’t know why- don’t see many homeless people who are there through not getting mortgages). We’ll have a 2 (maybe 3) tiered system of owners, subsidizers of buy to letters and a lucky few in social housing. If prices start to fall they’ll be bought by those who can afford them-people who bought their first properties 20+ years ago. There will be no rapid downfalls.

There will be no mass social housing to provide further options, we’re just heading for even bigger class divide-as with most historical divides in history it will actually be the toiling masses being exploited.

What are the factors that honestly make people think prices will fall 50%?

mmm ok, good luck with that,

Im going with it and working on that assumption because ive studied the result of every mass credit inflation and major bubble throughout history and know the end game. In the big scheme of things im not bothered about the positive or negative media items (they are following perfect contrarian indicatiors not leading) or the bounces/ corrections that can last months and or years. This particular credit expansion has taken generations to build and therefore isnt gonna be a couple of years in deflating. All the economic data i read says theres only one direction we're headed. All the socionomic data of the last few years has screamed out peak of a major bubble has been reached and the financial system being crippled at the same time only confirms this and adds icing on the cake.

PLenty of ups and downs to come but the big and prolonged moves will all be down over the coming years in pretty much every asset class you can think of.

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Not to disagree with all of your points but with regards to devaluation, I'm pretty sure the Gov't and the MPC would LOVE sterling to depreciate further.

Perhaps they would, but inflation will keep growing then, and could become impossible to try and control. If inflation were to get out of hand, it would be devastating for the UK economy.

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I think that once people have predicted financial meltdown it's humiliating to accept that this is a standard recession,pure and simple.We have seen major realinement on house prices and now things are bumping along the bottom prior to a slow recovery.The Cameronistas are desperate to keep the doom and gloom going for another ten months but in truth it isn't possible because business doesn't value a Tory government above profits.True they would like both but if it comes to a choice they will ditch Dave.After all he can go back to Rothschilds.

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We have seen major realinement on house prices and now things are bumping along the bottom prior to a slow recovery.

no and err, no.

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Not to disagree with all of your points but with regards to devaluation, I'm pretty sure the Gov't and the MPC would LOVE sterling to depreciate further.

If only it could somehow devalue without inflation kicking in... :lol:

But it can't. It remains to be seen if the government has the guts to defend sterling. If not then house prices will still go down, only not relative to sterling. :blink:

Actually, I think when sterling finally collapses they will over-react out of fear. Then we will know real pain. :o

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Because the economy (the real one not the lalaland BBC one) is in very, very dire straits.

Because the average FTB is now 36 years old (61 at the end of mortgage), has a high income and a gifted deposit.

Because the government has 'invested' so much in preventing a depression it will take several generations to pay off.

Because the government spent all the money on bank's in the spreadsheet economy and now there is nothing left to fix the real economy.

Because interest rates can, and will only go up.

Because oil pretty much can only go up from the lows it has visited recently.

Because we will soon be getting lots of repossessions.

Because of the government deficit.

That do you for starters? :P

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Cheers, I’ll expand a bit more later. However, the price/earnings thing is a total irrelevance imo. We’ll just have a situation where ‘average’ earners cannot afford to buy, even 2 together. Renting will be the norm and political pressure will hopefully stop this being the exploitative joke that it currently is (scope for improvements, longer security of tenure, maybe clamp down on BTLs?) Why will prices being so much more than average earnings cause prices to fall? More a case that the already wealthy will buy more when they drop and rent them out/pass on to their kids

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Cheers, I’ll expand a bit more later. However, the price/earnings thing is a total irrelevance imo. We’ll just have a situation where ‘average’ earners cannot afford to buy, even 2 together.

no. rental yields are awful.

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no. rental yields are awful.

Rental yields are awful because instead of sell-to-renters we now have "rent-to-sellers" as discussed in the Beeny property snakes thread. People who don't want to realise a loss so they rent out in the meantime. That works as long as rates stay low and let them cover the mortgage, but this oversupply to the rental market is obviously not good news for generic BTL type properties.

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Cheers, I’ll expand a bit more later. However, the price/earnings thing is a total irrelevance imo. We’ll just have a situation where ‘average’ earners cannot afford to buy, even 2 together. Renting will be the norm and political pressure will hopefully stop this being the exploitative joke that it currently is (scope for improvements, longer security of tenure, maybe clamp down on BTLs?) Why will prices being so much more than average earnings cause prices to fall? More a case that the already wealthy will buy more when they drop and rent them out/pass on to their kids

mmm, youve just explained the cycle (and the cycle is partly why prices will return back to original prices) as the description above would return it to how it was 30 years ago, which in turn will make letting less attractive causing a fall in prices as less people are willing to buy to let and then the cycle can happen all over again over the next 50 years.

Also you make a classic error in your idea that prices wont fall that far otherwise they will just be bought by those with money today (this is effectively looking at a future price based on todays market conditions, when the market conditions will not be as they are today but as they are at said future price) as prices fall things will be deteriorating and conditions will be changing at the same time and you are ignoring fear and human emotion which dictates people buy at tops and sell at bottoms. When the deterioration really starts people are more likely to be selling than buying. You should do some research on the phsychology of markets and bubbles to understand how they work

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Cheers, I’ll expand a bit more later. However, the price/earnings thing is a total irrelevance imo. We’ll just have a situation where ‘average’ earners cannot afford to buy, even 2 together. Renting will be the norm and political pressure will hopefully stop this being the exploitative joke that it currently is (scope for improvements, longer security of tenure, maybe clamp down on BTLs?) Why will prices being so much more than average earnings cause prices to fall? More a case that the already wealthy will buy more when they drop and rent them out/pass on to their kids

Did you write this in mid-2007 and forget to press POST for two years? :lol:

There was a time when priced-out-forever and society fragmented into two classes: owners and renters was almost orthodoxy, but I haven't heard that stuff recently.

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Cheers, I’ll expand a bit more later. However, the price/earnings thing is a total irrelevance imo. We’ll just have a situation where ‘average’ earners cannot afford to buy, even 2 together. Renting will be the norm and political pressure will hopefully stop this being the exploitative joke that it currently is (scope for improvements, longer security of tenure, maybe clamp down on BTLs?) Why will prices being so much more than average earnings cause prices to fall? More a case that the already wealthy will buy more when they drop and rent them out/pass on to their kids

Oh great, another trolling bulls*** artist.

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Guest UK Debt Slave
The funniest topics are the ones where someone will swear blind that the Dollar will definitely tank at 1:15pm next Tuesday.

And if you were privilaged enough to possess such information, you would be better off using that knowledge to make yourself some money rather than speculating about it here.

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I agree with most points here but surely by far and away the most significant thing that will effect house prices over the next 5 years is the UK's budget deficit. On top of rising unemployment, tighter lending criteria, rising government yields and hence mortgage rates (as the mkt prices uk government debt higher due to it's appalling fiscal situation) real incomes will drop 10-15% minimum as taxes rise across the board as detailed in a previous post (make no mistake they have too, if the next government do not it will lead to the situation spiralling out of control and uk default which will not be allowed to happen). This on top of big spending cuts...

This will have a dramatic impact on many aspects of the economy but put simply with all the talk of P/E ratios been too high, if you reduce the the real earnings side significantly what does that do to the price?

Personally i think anyone who is naive enough to think you can recover from the biggest downturn in 70 years in 2 years is probably an estate agent or a journalist!

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